Unmasking the Elusive SSI and NRI
Nick, Bhullar, Vice Chairman
The 7-Eleven franchise process is unique: approximately a 50-50 gross profit split between the franchisor and franchisee. (Actually this can vary to as high as 56-44 depending on the volume of the store). Franchisees own the inventory and hire and manage the employees. 7-Eleven controls the lease on the building, creates the “system” franchisees have to follow (contractually), and specifies and controls all the equipment.
Under this system, franchisees have to purchase 85 percent of their goods and services from “recommended vendors” and have 15 percent leeway to customize their stores. How does a vendor achieve this vaulted “recommended vendor” status? By having their product(s) become recommended product(s) in the 7-Eleven system. Once products are recommended, a whole host of advantages kick in: recommended vendor status, freight on board guaranteed at McLane, SLIN numbers assigned that make the product easier to find in the ordering system, promotions with 7-Eleven, and the simple fact that the product has been endorsed by corporate and the category manager believes the product will succeed in our stores.
Not all products, even those from recommended vendors, can get “recommended product” status, and not all vendors with good products are accepted by the category managers at 7-Eleven. According to NACS, several hundreds of new products enter the c-store pipeline every year. Some companies are too new, or they are small and local, and can’t get the endorsement of the company. Yet some of these products can be very good selling items that we want and need in our stores, and if we wait for them to become recommended, we’ve lost the opportunity.
7-Eleven category managers work very hard to categorize, evaluate and specify which products will be recommended, but nothing’s perfect. Sometimes it takes months for a hot product to come to the attention of the category manager. It takes time for the company to meet with the manager in Dallas, for SLINs and UINs to be assigned, and for a First Order Date to be set up, at which time franchisees can order the product through the system.
What’s the alternative? Enter the elusive Store Supported Item (SSI) and the elusive Non-Recommended Item (NRI). A Store Supported Item (SSI) is a non-recommended item from a recommended vendor for the store. For example, if a major soda company has 40 products available for sale, but only 18 of them are recommended in the 7-Eleven system, the other 12 items are non-recommended. If a franchisee knows that two of those items will sell like hotcakes in their store, he or she can set those items up in their ordering system as SSIs, non-recommended items from a recommended vendor. Almost every item in McLane can be handled this way because our major distributor is set up as a recommended vendor. The item will then be treated like a recommended item in our POS system, and it can be scanned and ordered like any recommended product. Within two weeks that item will become like any other recommended product for that store.
NRIs are a bit different. An NRI is a non-recommended item from a nonrecommended vendor. These items are often local items from local companies, or items from companies that have been turned down by the category managers in Dallas. They can be hot selling items from companies that may not ever have recommended items. Take Spinners for example. Spinners were so hot on the American scene that franchisees were looking to buy from any source available anywhere, and we could bring them in as NRIs and make good money on the opportunity. NRIs would be part of the 15 percent of products that franchisees can order that don’t have to be recommended by Dallas. The good news for vendors is if their NRIs sell well, they can package the results and go (or return) to the category manager in Dallas and have a better chance of becoming a recommended vendor.
Using these two methods—SSIs and NRIs—SEI has given franchisees the ability to order almost any conceivable item that vendors can imagine. This is especially useful for many stores—say you have a big Irish clientele, and you want a full display of Irish candy. Or you have a large Hispanic customer base, and you need a large number of Hispanic foods or alcoholic beverages in your store. In these situations, SSIs and NRIs are tremendously useful. Franchisees often share information about these products, because if a product is selling well in one store, it might sell extremely well in another store too…and we like to share with our friends.